An AMD-commissioned report claims Intel's practices hurt the industry on a massive scale

According to a recent AMD-commissioned study by research firm ERS Group, Intel gained approximately $80 billion USD in monopoly profits over the course of 11 years since 1996. ERS Group director Dr. Michael A. Williams, said that while gaining billions in profits is normal for a company of Intel's size, Intel gained an extra $60 billion by using anticompetitive business practices. Essentially, Dr. Williams' report claims that Intel overcharged for microprocessors and other related products.

Intel has been in a legal situation with the European Union for the last several years, being a prime target for antitrust investigations. Just recently, Intel disputed the EU's claims that its business practices negatively impacted the market and consumer spending. Intel claimed that many if not all complaints were directly from AMD and not customers at all. True enough, most of the complaints filed to the EU have been by AMD and companies that received subpoenas from AMD to release information.

"We are confident that the microprocessor market segment is functioning normally and that Intel's conduct has been lawful, pro-competitive, and beneficial to consumers," said Intel senior vice president and general counsel Bruce Sewell in a statement.

According Dr. Williams' report, Intel collected roughly $141.8 billion USD in profits from 1996 to 2006. The report subtracted normal competitive profits as well as economic profits and something called "assumed advantage profits" of 5%, leaving Intel with $60 billion in monopolistic profits. Despite assumptions using what the report called "standard economic methodologies," it is impossible to determine exactly just how much extra profit Intel gained from a monopoly.

"To be conservative, the study next provided Intel with a generous assumption that 5 percentage points ($28 billion) of its economic return were attributable to legitimate advantages. That left the $60 billion monopoly profit figure," indicated the report.

Assumptions aside, Intel has done very well over the last several years. Its price structure however has not changed drastically -- flagship processors always carry a big premium while lower models always give the better value. Intel's halo processors typically carry a price tag of roughly $1,000 at retail; Intel value processors occasionally fill a sub-$60 price point.

An area outside of the legal system where AMD constantly competes with Intel is in prices. Over the last two years, the price war between AMD and Intel has been nothing less than beneficial to the consumer. AMD recently cut prices on its multi-core processors, giving another shot in the arm to Intel. In this back and forth price cutting, AMD essentially reduces its potential profits. Intel traditionally competes by using heavy marketing campaigns that run on a global scale, but AMD's marketing strategy heavily focuses on the U.S. market -- a small percentage of the overall global market.

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To the enthusiast market, one would think that. And from that perspective I would agree.

However, majority of world-wide computer buyers do not research the performance differences between C2D and X2, Pentium and A64, etc. They buy based on price and what they get for the price - in the basis that more is better. More memory, hard drive space, DVDRW vs DVD/CDRW, larger monitor, etc. Most people that purchase computers from the major manufacturers: Dell, HP, Acer buy retail because its for business or they do not know enough about computers to research, build, and support their own. Its no secret that Intel has a major leg up when it comes to the number of retail computer offerings of Intel vs AMD computers it the market.

There for to us, sure we buy based on performance, price, and overclockability. But the average user buys based upon a packaged price, not performance per megahert.

If that is all that the standard has to be, "dominant power" in the EU, then every small town resteraunt owner should sue McDonalds for having crushing local dominant pricing power.

My take on the above report:

quote: It is a tale told by an idiot, full of sound and fury, signifying nothing.

A fine example of using an economist and statistics (and we all know what statistics are) to make an eye-popping claim, a propaganda tactic to make a huge claim and then hope that a smaller one that previously wouldn't of been accepted will be when compared to the previous massive claim.

And even if Intel has been a naughty boy, we should just be thankful AMD survived because at this point it'd do more harm to the processor market breaking up Intel in to multiple CPU firms (if it would even be possible) or sticking them with a huge fine (which would be passed on to customers in higher prices / lower performance sooner or later). Would those actions satisfy government lackey's that get a thrill out of sticking it to big, evil American companies? Yep. The rest of us though would just suffer.

The difference is that you don't see McDonalds selling their products to restaurant chains so they are the majority of the supply chain. It's not just about being in a dominant position, it is being in a dominant position and then preventing people from going to the competition. In this example, it would be like McDonalds forcing restaurants to buy their beef from them, and if they dared to buy from somewhere else, supplies "might be delayed" to the point where the restaurants are afraid to buy from a third party.

That is the anti-competitive sorts of behavior Intel has been accused of doing, where there was a threat, or an encouragement not to buy from the competition, at risk of retaliation.

Now, AMD is not claiming that they should have gotten all of the "monopoly money" the report claims that Intel has gotten, but shows a motive for Intel to keep their monopoly position. $60 billion is a LOT of money, and if you figure that $20 billion has been gotten as a result of unfair business practices over the years that should have gone to their competitors, that's grounds for a fair amount of it to go to Intel's largest competitor if AMD wins the lawsuits.

A lot of elements are not intended to show that AMD should get all the money, but instead just add fuel to the fire when it comes to the legal battle. No matter how impartial judges may be, if there is continued news that shows that Intel has been accused of improper business practices around the world, it WILL add to a pattern of what Intel business practices are.

I do remember when Asus released their first K7 Slot A motherboards that the product was sent out in a plain white box with no fancy packaging of any kind(unlike their Intel motherboards). The general feel, based on comments posted from all over, is that Asus was afraid of losing supplies of chipsets if they hyped their AMD based motherboards as much as they hyped their Intel based motherboards. The K7M was an AMD chipset based board as I recall, one of the first from a big name in the industry to support the AMD Athlon. It was NOT common to find a motherboard to support the new AMD chips in those days. Keep in mind that before the Athlon, AMD processors would work in the same motherboards as an Intel processor since the socket type was the same. This meant that motherboard manufacturers did not need to worry about supporting chips from both manufacturers.

quote: If that is all that the standard has to be, "dominant power" in the EU, then every small town resteraunt owner should sue McDonalds for having crushing local dominant pricing power.

This analogy is quite terrible. Unlike Micky-D's, Intel's customers aren't the end user, it's the OEM that sells the machine to the consumer (when was the last time you bought a CPU directly from Intel?). Because Intel supplies critical components to OEMs, they have significant bargaining power. From the claims I've read, Intel has used this leverage to convince OEMs to sell less AMD products, sell no AMD products, or delay the sale of AMD products. Intel can do this because AMD cannot supply enough CPUs for entire OEM orders (Intel can).

This lawsuit happy world that we live in has people questioning the validity of every lawsuit. However, if AMD's, The EU's, Japan's, and Korea's claims (all have filed against Intel) are true, and Intel's anti-trust activities have significantly hurt AMD's opportunity to make revenue, then the consumer loses.

quote: or sticking them with a huge fine (which would be passed on to customers in higher prices / lower performance sooner or later).

Where have you been? If AMD wasn't pricing aggressively, how much do you think you'd be paying for a Core2? Notice how this time, when AMD's product is not competative, Intel's prices are lower than the last time this happened (P4)? Since the lawsuits, we've seen better prices from Intel. Heck, we've even seen Dell start selling AMD products. Coincidence?

quote: Because Intel supplies critical components to OEMs, they have significant bargaining power. From the claims I've read, Intel has used this leverage to convince OEMs to sell less AMD products, sell no AMD products, or delay the sale of AMD products. Intel can do this because AMD cannot supply enough CPUs for entire OEM orders (Intel can).

Looking from this high-level, isn't a company SUPPOSED to try and get their products purchased rather than that of the competitor? Wasn't AMD trying to get their products used instead of Intel's, and doing so by any legal method they could muster? There may be problems in the methods used, but the goal of selling your company's products to customers rather than having the competition's being bought by those customers seems to be a proper and honorable goal.

quote: Where have you been? If AMD wasn't pricing aggressively, how much do you think you'd be paying for a Core2? Notice how this time, when AMD's product is not competative, Intel's prices are lower than the last time this happened (P4)? Since the lawsuits, we've seen better prices from Intel. Heck, we've even seen Dell start selling AMD products. Coincidence?

Also note that Intel changed "administrations" a few years ago, that may have had an influence as well.

Just to be clear, AMD charges that Intel intentionally locked AMD out of the pre-fab computer market by offering price specials to companies (Dell, HP, then-Compaq, IBM, all the various laptop manufacturers) who agreed to exclusively sell Intel-Inside. If anyone here has any sort of memory, the only computers that you could order which contained AMD procs were lower-end E-Machines and the like... All of the major OEM's had deals with Intel.

For 110 years, under the Sherman Anti-Trust Act and action by a buisness which would make it difficult for their competitors to access markets is illegal. What Intel did was against the law. This lawsuit on the other-hand supercedes the post-C2D by at least 6 years, 8 in some territories.Intel will likely have to pay for their practices in Europe, however the conservative court-packing that the last 20 years has seen leaves their fate in the US unsure.

That doesn't make alot of sense to me. Many deals are made to exclusively sell one type of product over the other, or simply to favor that product.

If I remember correctly, there was an article here about Sony and Blockbuster entering a deal to favor Blue Ray. If Sony went out to every seller around and got this same deal, then they would be anti-competitive? I'd just call that smart managers on Sony's part.

I don't think that the laws are the same when it comes to "standards", but also, there is no monopoly in place when it comes to the HD market at this point, since standards are still trying to be set by the different players.

It's not the "type" of product that falls under the laws, it is the branding that does it. If one COMPANY is a dominant force, then that company needs to be careful of the monopoly laws, but there wouldn't be laws about engine types used in cars, just if the engines were supplied by only a handful of companies with one huge dominant player that was using questionable business practices for that player.

From that perspective, the whole Verizon vs. Vonage legal battle ALMOST falls into this category except that there are multiple phone companies around, which means that Verizon is NOT a monopoly in the traditional sense. I have seen that calls between Verizon land line services and VOIP or other cell phone carriers tend to be less reliable than from Verizon cell phone service and Verizon land lines. That could be grounds for a good lawsuit too.

True. I fit the stereotype - I am an enthusiast, but I buy Intel for compatibility.

My original first impressions of AMD were back in the 486 days and they weren't as favorable. I've also owned AMD K5's and have had issues with the VIA chipset drivers. I've seen Half-Life run too fast on AMD's and applications fail to launch on Athlon's. Eventually, somethings got to give and it's usually my spending dollar.

I don't know where AMD stands today, but it is going to take something more than a sub-performing Core 2 wannabe to get me to look at AMD offerings again.

Uhh, just for the record 9nails, AMD cpu's traditionally have less errata than Intel CPU's, generation after generation. And when you factor in that most high-end applications and games are optimized for both platforms (SSE and 3DNOW!) there is little...very little room to cry 'compatibility.'

If you're thinking of the 'Compatible with Windows' statements that AMD, Cyrix, and IDT had to use back in the day, that was because people were ignorant of the x86 architecture, much like yourself, that they needed a little reminder that its really 'Apples to Apples' in the end.

It's is, and always has been, a battle of performance, price, flexibility, and owner loyalty. Compatibility has never been a debatable topic.

Personally, I base my tech purchases on the current situation, not the situation as it was nearly 10 years ago (5 generations in electronics). AMD hasn't had "compatibility" problems since the slot-A days, when VIA's chipsets were causing all sorts of problems.

Really big companies also tend to be quite conservative in buying habits. And IT managers likewise. For instance...

An IT manager has to purchase 1000 computers, probably from Dell or HP. If processor even comes up, regardless of his personal preference, he/she will most likely go with Intel. Why? Because they are the major player in the market. And it's an unfortunate fact in the business world that if there is a problem with these computers it goes like this.

If they are Intel, upper management will say "it's an Intel problem, no way to predict it, get IT on the fixes".

If it's an AMD/other processor, they'll say "AMD? Who authorized this second rate stuff, I want some heads". And the IT manager will be pounding the pavement.

Bottom line, in big business, taking risks will get you a big gain, or loss. On procurements, anything but the mainstream largest supplier is a risk, calcuated or otherwise. Most people are very careful about risking their jobs. Unless they are too young to care or know, or rich enough that it doesn't matter.

For some reason people are acting like this lawsuit was only brought forward when the core 2 duo came out, and it is against the core 2 dou that people believe amd is suing for, well it isn't. AMD is suing for mostly past things intel did to make their very compeptetive products such as the very competetive k6 and k7 cpu's and where intel made it very hard for them to operate, telling companies that they wont get such low prices if they stock amd cpu's and other activities. This isnt only about how intel treated the market during the core 2 dou years but also how the market was run during the k6, k7, and the k8 years.

It was just a year ago that no one wanted to pick up an intel product, I bet people will be singing a different note if amd had a competeive product to the q6600's. The thing is that AMD's legal fight with Intel encompasses all the way to the beginning not the idiot's that are on this sight who seem to think that amd only is arguing about how the am2 isn't selling as well as the core 2 duo.

Also to those people who think AMD is spending all there money on lawsuits is wrong, if you want an example of that go look at SCO not AMD.

@swatx Intel had nothing on amd for years and you make it sound like amd can come out with the worlds best product in 6 months, while it took Intel something like 3 years to come out with a competitive product to AMD's k8.

> "AMD is suing for mostly past things intel did ...such as the very competetive k6 and k7 cpu's and where intel made it very hard for them to operate..."

The problem is that, during that period, AMD was gaining market share hand-over-fist, culminating in their actually outselling Intel at the retail level. AMD wasn't being squeezed out of the market-- for every reseller who refused to stock AMD chips, dozens of others gladly did so. There were even a few AMD-only VARs in existence

AMD is suing because of monopolist tactics in OEM channels, not retail channels.

OEMs were encouraged to buy 90-100% Intel chips, so they didn't have any capacity left over to buy AMD chips.

Intel did this by offering them special prices. Let's say Intel was going to sell CPUs to Dell, and Dell expected to fill 1 million orders in the next time period.

Intel would offer Dell: The first 500,000 CPUs you buy are $200 each. The second 500,000 CPUs you buy are $100 each.

Dell would then logically choose to buy 1 million Intel CPUs, for an average price of $150 each, because they could make a lot more money that way than if they went 50/50 Intel/AMD.

Because of those kinds of deals, Dell was 100% Intel for a very long time, and other OEMs were 90%+ Intel.

I'm not a lawyer, so I can't tell you if that's a monopolistic pricing scheme. I can't tell you if Intel will be found guilty and have to fork over billions of dollars. But that's what the case is about, it's not about the retail channel.

Don't try and mix in facts or you might confuse him. He is obviously one sided, and thinks just because for a small period of time that Intel got out sold in a small sector of the market that it proves Intel didn't commit any anti competitive actions through out the whole history of Amd and Intel.

A quantity discount, as he described it, is a monopolist tactic; perfectly competitive firms never price discriminate, as their products are homogenous commodities and face a single market-determined price.

Not that it's a bad thing -- there is no perfectly competitive market, and all firms are either bordering on failure or act as monopolists. Just saying; it's a monopolist profit maximizing tool. A competitive farmer in a competitive grain market would never offer or accept a quantity discount.

It's also not necessarily predatory pricing. But then the question becomes at what point is a firm being competitive and the next, with that extra penny off, they become "evil" and "predatory" -- too capitalist for their own good. The real debate is what do "evil" monopolists do and to what degree do they do it that all the other "good" monopolists don't do, and how bad does the "evil" monopolists have to be before getting punishment, and if they are that evil, do we punish them even if it hurts the consumer and the economy.

quote: A quantity discount, as he described it, is a monopolist tactic; perfectly competitive firms never price discriminate,

Maybe I'm misunderstanding you. Graduated pricing schemes based on quantity are common practice worldwide. Unless, of course, you price at or below cost for the sole purpose of driving someone out of business, which clearly wasn't an issue here

It's been a while since I read the Complaint; my memory was hazy. Actually, it's worse than either one of us described. Intel was giving a retroactive discount so the OEMs would have to buy 90% Intel to get any discount at all.

The result was that AMD had to sell their processors at a much lower price to get any business at all.

The class action that was filed back in January that claimed that Intel paid Dell over a billion dollars a year in kickbacks not to buy chips from AMD?

Well, you should because AMD has been beating that particular drum this week as evidence that the European Commission is on the right track in charging Intel with antitrust.

The only problem is that suit was withdrawn back in May, a fact AMD neglected to mention.

Seems the court refused to let Bill Lerach, the guy who filed it, be the lead lawyer for all the class actions filed against Dell after it was discovered that the SEC was investigating Dell.

Lerach of course was a partner in the old Milberg Weiss Lerach mob that took American companies for billions in dubious class actions over the years and is now under indictment itself for paying plaintiffs kickbacks.

Of course. A company's primary function is to encourage others to buy its products in favor of its competitors. When does such behaviour constitute an abuse of monopoly power? By standard antitrust law, you judge by the effects on the marketplace. Not the effect on individual competitors...but the end result to the consumer.

In the period in question, competition flourished. Prices dropped dramatically, new products were introduced at a dizzying pace, and consumers were treated to more choice in the marketplace than ever before. The CPU market was, in fact, one of the healthiest, most vibrant examples of competition to ever exist. The consumer benefitted, and by this touchstone, there was no abuse of monopoly power.

> "Because of those kinds of deals, Dell was 100% Intel for a very long time"

But dozens of other OEMS were *not* 100% Intel, and AMD was in fact gaining market share quickly. Consumers always had a choice as to which product to buy, and competition was not only preserved, it flourished.

> "Intel would offer Dell: The first 500,000 CPUs you buy are $200 each. The second 500,000 CPUs you buy are $100 each"

As others have pointed out, this isn't true. Intel allowed certain OEMs cobranding dollars to be used to advertise the OEMs products, on the assumption that, if the company was selling only Intel chips, advertising its products was essentially advertising Intel's.

As long as competition is preserved, such vertical-market arrangements benefit consumers.

I had no clue AMD was out selling Intel in the retail space with the k6's and k7's. Enlighten me with some actual numbers, then just some blanket statements.

Even if AMD was outselling Intel in the retail space during the so called glory days of the k8 it only encompasses retail! Intel was still out selling them, even when they(AMD) had a much better and effiecent chip. I wouldnt call 17% during the *glory days* a great number.http://news.com.com/AMD+surpasses+Intel+in+U.S.+re...

> "This only happened AFTER Intel stopped their "rebate program" due to pressure from the lawsuit... "

Dell was Intel-only till the very end of 2005, long after AMD began its rapid market-share rise. That leaves only two possibilities. Either the rebate program was still in existence, or Dell had reason enough to be exclusively Intel without the program. Either way, its bad news for the AMD lawsuit.

Still worse is the fact that most other OEMs began selling AMD chips well before this date, in fact as soon as AMD had a competitive product...plus the usual lag time due to normal big-business latency. Dell is a big company, but its still well under 20% of the total computer marketplace. If AMD had been barred 80% of the total market, the suit would likely have merit. But 20% is a far cry from monopoly share.

quote: It was just a year ago that no one wanted to pick up an intel product,

If you ever thought this was the case, you are delusional. The majority of computers users never knew that AMD had a faster chip, and wouldn't have cared. Intel had/has the name and the rep. Perception is everything in business.

"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer